Handling the payroll is an essential part of any business. Unfortunately, a third of employers make payroll mistakes every year, which ends up severely costing them.
5 Ways to Fix Payroll Problems Fast
The mistakes will not only cost your business revenue, but they might also incur penalties from the Internal Revenue Service (IRS).
Your employees are often the ones most hurt by your payroll mistakes.
Therefore, it is in your best interest to ensure you fix any payroll problems you have and fix them as fast as possible.
The following are some of the most common payroll problems and ways to resolve them quickly:
Managing Overtime
According to the Fair Labor Standards Act, the average working time in a week is 40 hours a week.
The Act requires employers to pay at least one and a half times regular wages for any additional time worked.
Employees working overtime presents a unique challenge to employers since they have to monitor the exact number of hours worked overtime.
Employers also have to know how to add overtime wages to the employee’s regular wages.
The solution is to have a system to monitor all of your employees’ working hours, including overtime.
Your payroll processor should have adequate records of employee working hours and which they can do with excellent web-based time clock software.
Inaccurate Deductions
An employer must make several deductions from an employee’s gross pay before getting their take-home amount. Some of the deductions include health insurance, taxes, and social security.
A payroll error you will often find is making inaccurate deductions from employee’s paychecks. The error is often deducting more than necessary.
An easy solution is to create employee pay stubs online that outline each deduction on an employee’s paycheck.
It makes it easy to compare with your records and determine if the deduction is sufficient. Even if the paychecks go missing, you can use a pay stub maker to create missing stubs online.
The records are easily accessible and make it easy to correct inaccurate deductions.
Another solution to inaccurate deductions would be to get payroll software.
All you have to do is set the deduction rates, input the employee information, including gross pay, and the software will do the rest.
The software will address inaccurate deductions, which is often a human error.
Misclassified Employees
As an employer, you should understand that you could have many people working for you, but not all are your employees.
You may hire freelancers, temporary employees, or independent contractors for various jobs.
Therefore, you must understand how to classify various workers as misclassification is one of the biggest payroll problems employers face.
Misclassifying employees will not only lead to payroll problems but will also result in fines from the IRS.
The solution is to thoroughly understand a worker’s classification whenever you hire them. The way to do so is to use IRS resources to determine the classification of various workers.
Correct classification will help you determine which benefits the worker is eligible for from your company.
Proper categorization will also help you better understand which taxes you need to withhold from the employee’s pay.
Moreover, it will help you know which forms you need to fill when filing employee taxes, as the wrong documents will incur penalties.
Miscalculating Pay
Payroll administrators need to keep track of numerous factors when calculating employees’ pay. They have to deal with overtime, deductions, commissions, and bonuses, among others.
They also have to keep accurate track of employee working hours to calculate pay accurately.
Different states also have different policies regarding payment which can cause pay miscalculations.
Dealing with so much often leads to miscalculating pay which can cause serious payroll issues. The way to fix errors regarding pay miscalculations is to resolve them as quickly as possible.
A payroll correction will have to be done and the money paid to the necessary parties immediately.
On the other hand, a payroll correction may involve reducing pay from overpaid employees. If impossible, the pay reductions or additions can be carried forward to the next period.
Data Entry Errors
Many companies have automated processes; hence human errors are highly unlikely.
However, some companies still manually handle payroll elements, so there is a chance for human error.
People can make many mistakes during the data entry process, which can affect the entire payroll.
Unfortunately, it is impossible to reduce all human error. Therefore, the best you can hope for is to minimize the mistakes.
When you recognize an error, rectify it as soon as possible and make the necessary adjustments.
Wrong Tax Rates
Even the most negligible errors can have a significant effect on payroll. One such mistake is charging employees the wrong tax rates.
It is so common to charge employees the wrong tax rates because tax rates are constantly changing.
The tax rate you initially charged your employees might be vastly different from the current tax rate.
The way to fix this error is to automate your payroll software to automatically change the tax rate whenever necessary. The ensuing calculations will be correct, and so will your payroll.
Late Payroll Processing
Companies often have plenty of time to do their payroll processing. However, many employers struggle with processing their payrolls until it is too late.
Many of them push the process until it is necessary to finish it.
However, issues do arise which can throw off your payroll processing schedule and lead to late payroll processing.
You will end up paying your employees later than agreed upon, leading to very unhappy employees.
The solution is to take accurate records of your employees’ job attendance and time schedules. You can use an automatic time recording software that will log all of your employees’ working hours.
You can easily sync your payroll software with the time recording software and speed up your payroll processing schedule.
Multiple State Employees
As an employer, you will have to adhere to state laws regarding employment, taxes, and wages.
Unfortunately, some employees work in multiple states, which can make processing their payroll quite challenging.
Such employees make your payroll processing difficult because you have to comply with the law from different states.
You may have to file taxes differently for each state, or you might have to calculate wages differently based on the two states’ laws.
In most cases, you will have to have two separate payrolls for each state.
The solution is to have a payroll program that can handle employees from different states. Get payroll software that can handle different tax and state laws for the same employee.
Conclusion
To conclude, business owners, conduct many errors during payroll processing. The above are some errors and how to fix them, but they are by no means the only ones. Use the solutions above to improve your payroll processing.
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